The Johns Hopkins Bloomberg School of Public Health, Baltimore, Maryland (A.P.S., G.F.A.)

Acknowledgment: The authors thank Rujul H. Desai for his comments and Luyao Ma for her research assistance.

Grant Support: By the Laura and John Arnold Foundation through a grant to Johns Hopkins University. This research was partially funded by The Black & Decker Research Fund of The Johns Hopkins Carey Business School.

When prescription drugs became a new insurance benefit in the 1960s, companies known as pharmaceutical benefit managers (PBMs) started helping insurance companies manage the pharmaceutical part of the insurance business. The PBMs decided which drugs would be in the formularies, administered drug claims, and negotiated with drug manufacturers and pharmacies on behalf of insurers. Through these activities, PBMs offered value by containing drug spending.

Over time, PBMs became larger and took on new roles. In the 1990s, drug manufacturers acquired certain PBMs but later spun them off, because the Federal Trade Commission raised concerns about conflicts of interest. Since the 2000s, however, mergers and acquisitions have created market giants. The 3 largest PBMs—Express Scripts (an independent company), the pharmacy service segment of CVS Health, and OptumRx (the pharmacy service segment of UnitedHealth Group)—now have more than 180 million customers and control approximately 80% of the market (1). The combined operating profits of these 3 PBMs increased from $3.4 billion in 2007 to $12.4 billion in 2016 (2). The PBMs also are providing new products in today's market. For example, they have created pharmacy networks and now offer mail-order pharmacy and disease management services. The combination of increased size and scope expansion has prompted concerns that the business practices of PBMs may be contributing to higher list prices for brand-name drugs and thus a higher cost-sharing burden for patients, which may reduce their access to prescribed medications and lead to less adherence and worse health outcomes (3).